Is there some quirk in the tax law that allows a normal distribution from a rollover IRA taken on Jan 2nd of this year to be put on the 2012 1099-R? That seems to be what happened and I'm not sure why.

FinancialDave wrote:Is there some quirk in the tax law that allows a normal distribution from a rollover IRA taken on Jan 2nd of this year to be put on the 2012 1099-R? That seems to be what happened and I'm not sure why.

Any thoughts.

That's strange. I did a normal distribution on January 2 of this year from my rollover IRA. It was deposited in my bank account on January 4. It was not put on my 2012 1099-R. Was that the same scenario as yours....out on the 2nd and deposited on the 4th??
OR, was it out on the 31st and deposited on the 2nd? This one would have been on your 2012 1099-R.

People should not say everything they think. They should think about everything they say.

The general instructions for Form 1099 indicate that reporting is based on the "paid" or "transferred" date. For most institutions, the processing date would determine the year of inclusion, even though the check may not be mailed until 1/2. For this reason, if it matters which year your income is reported it is best not to order distributions after Christmas because you can never be sure whether they will be processed in the current year or not.

FinancialDave wrote:As it turns out they made a mistake and have agreed to correct it, so all is well.

Do you know what their mistake was? If they processed the distribution in 2013, hard to imagine how it ended up on a 2012 1099R. Did they provide enough of an explanation exactly what happened, or did they just agree to rescind the 1099R?

Since I am sure all this is done automatically, I think the issue was the computer knowing correctly what order was issued, as opposed to just "when the order was given."

Let's imagine you were my broker, and in 2012 I told you I wanted you to distribute $1000 out of my account starting in 2014 - would you book a distribution in 2012 when I am not to receive the money until 2014. I would hope not. This is a gross exaggeration of what happened, but the technicality is I believe the same. What I did was a little before midnight on Dec 31st issue an automatic order for a distribution starting the 1st of every month (in this case the distribution happened on Jan 2nd because Jan 1st was a Holiday. Thus the distribution was not only executed in 2013, but the ordered execution date was in 2013 as well. The only thing that happened in 2012 was my decision to execute an order in 2013.

Thanks. That makes sense, and you were very smart to jump right on this. There are constant cases when custodians agree to correct things if they can without much expense and hassle. Since the hassle increases with time, the faster you request consideration, the better your chances are, even assuming the merits of your argument are the same.

I generally try not to initiate any transaction after Christmas, knowing there is a risk of it either not getting done at all or getting processed in the wrong year.